KARACHI: Textile millers have urged Federal Board of Revenue (FBR) to bring down the corporate tax rate to 25 percent from existing 30 percent to align with best international practices.
In its proposals for budget 2018/2019, All Pakistan Textile Mills Association (APTMA) said USA and in India the maximum tax rate in corporate sector has been reduced to 25 percent or even less than that. In order to align with the best international practices, the upper cap of Corporate tax be fixed at 25 percent which may subsequently be reduced to 15 percent.
It is suggested that either the standard rate of 30 percent is brought down to 25 percent or reduced rates are prescribed sector-wise especially for the textile sector.
Globally, the corporate tax rates have been reduced in the recent years and accordingly in order to align with the best international practice the corporate tax rate be reduced to 25 percent for Tax Year 2018 and it is gradually reduced to 20 percent in subsequent Tax Years.
This will encourage the people to switch over to corporate sector which are easily manageable by the companies as well as by the tax offices.
Alternatively or simultaneously sector-specific corporate tax rates be introduced as in the case of banking companies and in case of export sectors the corporate tax rates are kept 5 percent lower than the standard rate.
APTMA further highlighted that there are growing number of instances wherein the corporate taxpayers are deriving non business income as well such as bank profit, dividend, capital gain on sale of shares and property income. Presently, there are standard rate of taxation of these sources of income for the corporate sector and there are no sector specific concessional rate though the policymaker in case of business income has envisaged concessional tax treatment.
Rather set off of business losses towards the property income is not allowed under section 56(2).
It is suggested that reduced rate of corporate tax are introduced for the export sector in respect of their non-business income such as bank profit, dividend, capital gain and rental income.
If the export oriented textile sector has been given concessional tax treatment in respect of business income, standard treatment in respect of other income whether casual or regular is against the principles of consistency. This other income is best use of available fund which would be ultimately used in export oriented business and standard taxation of this casual income would reduce the available funds for business growth and diversification.
